HealthStore in Print

Prescription for a Healthy Africa

By: Mark Turner
Published: Financial Times
Date: February 23, 2001

It was while pondering the virtues of McDonald's french fries that Scott Hillstrom, founder of Cry for the World Foundation, saw the future of cheap drugs distribution to Africa's poor.

Today, the organization has set up 11 micro-pharmacy franchises in central Kenya. By next year, it expects to have 60 in place. CFW already feels confident that with the right technical support - paid for by the franchisees - it is feasible to distribute drugs cheaply to rural Africans, without the need for foreign aid.

"It was in New Zealand that the idea to use franchise principles to distribute essential drugs occurred to me," explains Mr Hillstrom, a US-based lawyer who runs HCA enterprises, a business development company.

"Most top-down approaches have failed because they create counter-productive incentives - encouraging people to divert drugs to unauthorised uses, to charge exploitative prices and to sell ineffective, adulterated or bogus drugs."

After conversations with Bruce Davis, a McDonald's franchisee in New Zealand, and Steve Collins, the founder of Harcourts, a successful Australasian chain of franchise estate agents, he felt he had the answer.

If he could establish a low-end pharmacy chain sustained by commercial profit - but with clear and strict rules on how drugs should be distributed - essential medicines might become as readily available to rural Africans as the Big Mac is to people in the developed world.

It is crucial work. Across the world, 25,000 children die every day for want of medicine "that costs less than a cup of coffee", explains Mr Hillstrom.

Kenyan government health clinics are few and far between and patients often find no drugs in stock after a day's walk and a long wait. Private pharmacies fill some of the gap but sell expensive, branded products that provide them with higher profit margins, according to Liza Kimbo, who used to manage a chemist chain but now heads CFW in Kenya.

To build its franchise network, CFW tapped into an existing system of community health workers who had been abandoned after donors had withdrawn their funding. It gave them new training and encouraged them to set up small shops under strict guidelines, such as keeping clear records.

Eighty per cent of the cost was covered by a micro-loan, repayable at 18 per cent interest. The other 20 per cent came from equity raised by the owners.

CFW is in charge of procurement. The basic but essential stock - oral re-hydration therapy, malaria cures, painkillers - comes from local generic manufacturers. The foundation's costs are currently covered by donor funds but the organization intends shortly to start factoring them into the franchise fees. It is also setting up a system of clinics, run by nurses, each of which takes referrals from several franchisees.

Outside the Good Samaritans shop in Ruambiti, Margaret Wanjiru explains that having a distributor only a kilometre from where she lives has made a world of difference. Before, she would have had to pay a bus fare to the local hospital "and even then they sometimes had no medicine".

James Mugo, the storekeeper, is feeling positive. Life has been difficult - after three years of drought, Kenya's farmers are extremely short of cash. However, business is picking up and on one day last week he sold more than 800 Kenya shillings' ($10.20) worth of medicine. Once his loan is paid off, he will start to make a reasonable profit.

Mr Mugo points to a sign for branded Hedex painkillers, hanging from a shack down the muddy street, and laughs. "One Hedex costs 4 shillings but the equivalent drug I sell costs only 50 cents," he says. "They put the Hedex sign on my shop but I removed it."

Donors increasingly look for models that marry private enterprise with social welfare. CFW has attracted interest from the World Health Organization, Medecins Sans Frontie`res and the US's Management Sciences for Health Organization, which recently received a large donation from the Gates Foundation and is considering a franchise system in Ghana.

Assuming the Kenya pro-ject succeeds, Mr Hillstrom has big hopes. "The goal is the development of a franchise operating system that can be used not only by the Cry For the World Foundation but also by other organizations around the world," he says.

"Our inspiration is found in the Grameen Bank, which started making micro-loans to poor women in Bangladesh about 20 years ago. That model is now being imitated around the world. We think that micro-franchising may become to essential drug distribution what the Grameen model has become to micro-lending."

Copyright: The Financial Times Limited 1995-2001

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